Amidst the COVID-19 pandemic, many are left asking: how could people have better prepared for this crisis? Unfortunately, this pandemic is what’s known as a “black swan event”—an event that is almost impossible to predict but will have massive consequences when it occurs. While nobody knows when the next black swan event may occur, knowing this possibility means you should plan accordingly.
However, creating a solid financial plan may be difficult if you don’t know where to start. Deciding on your financial priorities can give you a solid base to ground your plans in. Below are questions you can ask yourself in order to create your financial plan and help you stay on track.
Questions to Help You Sort Your Financial Priorities
- How are you keeping track of your finances?
Think about the things you’ve recently spent on and the last time you received money. Are you able to recall these instances easily, or are you struggling to remember them? Can you back these instances up with records or receipts?
The best way to start your financial plan is to have a dedicated way of tracking your cash flow. By being aware of your earnings versus spendings, you can create a more solid plan. In the long run, having a record of your cash flow can give you the necessary data to adjust or recalibrate any financial goals or plans.
There is a wealth of mobile apps and software that will record your cash flow with ease. Even something as simple as maintaining a worksheet on your computer can work. The key is to dedicate time to keep it updated and accurate.
READ: 7 Modern Tools for Managing Your Finances More Effectively [Infographic]
- Is your current income enough for your lifestyle?
Coming from the first question, re-evaluate your spending habits. If you find yourself relying on your next paycheck to pay for necessities now, you may be living beyond your means. This behavior is not sustainable and can severely affect your financial health when a crisis hits.
You may need to make more frugal financial choices to reduce unnecessary spending and keep essentials cost-effective. If you already have similar measures in place, but find yourself with no excess cash after settling expenses, then the problem lies in your income.
With that in mind, consider investing in skills training and other means of professional development. By actively improving your skillset and capabilities, you can aim for higher-paying positions and begin building a savings plan.
- Are you the breadwinner in your family?
Being the breadwinner of your family can create a different set of financial priorities. Instead of focusing on your needs as an individual, you have to prioritize the needs of the household. This will also mean securing their necessities should something happen to you in the future.
If you are the sole provider of your household, getting insurance should be your top priority. Health insurance can help you maintain your mind and body, which are your biggest income-generating assets. Meanwhile, life insurance can help secure the financial needs of your family and offers additional benefits, like investment options.
READ: What Breadwinners Need to Know About Buying a Life Insurance
- How much outstanding debt do you have?
There are many reasons why someone can have debt, such as paying for valuable, big-ticket items like tuition, down payments on a home, or required equipment for professional work. Debt can also be incurred due to mismanaged spending or mishandling of credit lines.
While different types of loans or credit lines will have different terms and conditions, clearing your outstanding debt will need to be at the top of your list. Debts with high interest rates should be cleared first to prevent the sum from getting bigger and less manageable. Otherwise, clearing up some smaller debts can help you build momentum to tackle the larger ones.
READ: Debt Snowball vs. Debt Avalanche: Which Method is More Effective?
- Are you prepared for an emergency?
Global pandemic aside, unforeseen events can be financially draining for the unprepared. If you were to get into an accident or fall unexpectedly ill, would you have enough money to cover your medical and living expenses, especially if that also meant lost wages?
Having an emergency fund can provide you the means to cover costs and other necessities without hurting your financial situation. Investing in insurance—both for life and health—can also help alleviate the burden an emergency can take on your finances.
Prioritize for the Future
The journey to financial security is not an easy one, but with the right strategies and attitude, it is achievable. Asking yourself these questions is just the beginning—being able to come up with a realistic plan is also necessary to reach your goals. While this may mean sacrificing certain things in the present, starting now is sure to pay off in the long run.
In the middle of this pandemic, BPI AIA offers easy and accessible insurance plans to cover you and your loved ones. Schedule an appointment with our Bancassurance Sales Executives to learn more.